To cover the situation of overlapping provisions of the Natural
Gas Policy Act of 1978 fixing price ceilings for sales of various
categories of natural gas and providing for phased deregulation, §
101(b)(5) of the Act states that, if any natural gas qualifies
under more than one provision providing for any maximum lawful
price or for any exemption from such a price with respect to
certain sales of gas, "the provision which could result in the
highest price shall be applicable." The Federal Energy Regulatory
Commission (FERC) promulgated a regulation interpreting § 101(b)(5)
(and § 121, which relates to phased deregulation) to mean that any
gas that is qualified for both deregulated and regulated treatment
would be treated as deregulated. The regulation adversely affected
gas producers who had entered into long-term contracts that had one
clause setting the price (near the price ceiling) if the gas were
regulated and another clause setting the price (on the basis of
market price, or calling for renegotiation) if the gas were
deregulated. Because the market price of natural gas had plunged
below the regulated price ceilings, such producers stood to reap
higher contractual prices if their gas was regulated than if it was
deregulated. Numerous producers petitioned for review of FERC's
regulation. The Court of Appeals rejected FERC's interpretation and
adopted the producers' position that § 101(b)(5) unambiguously
requires the applicable category to be that which, at any
particular moment, garners the producer the highest contract price
for its gas. In explaining this holding, the Court of Appeals also
rejected FERC's ruling that certain "new tight formation gas"
subject to regulation under § 107(c)(5) is automatically qualified
for deregulation as new gas under §§ 102(c) or 103.
Held:
1. The Court of Appeals erred in rejecting FERC's interpretation
of § 101(b)(5). The statute's plain meaning governs. It provides
for the applicability of the overlapping provision that "could"
result in the highest
Page 486 U. S. 205
price, not that provision which "will" (depending on actual
contracts and daily market prices) result in the highest price for
each producer. Section 101(b)(5)'s words call for a simple
comparison between the highest price permitted by one provision and
the highest price permitted by another: the higher the price
ceiling, the higher the price that "could" result under the
provision. When one of the provisions sets no price ceiling at all
--
i.e., it deregulates -- that provision governs. The
court erred in concluding that reading the word "could" with its
ordinary conditional meaning makes so little sense that it must be
converted to the word "will." The statute does not mean to refer to
particular contracts, but rather to the generic situation of
parties in a precontract state: the provision that allows the
parties to contract to the highest conceivable price applies. The
statute calls for a comparison of statutory provisions, not
contractual ones, and nothing in the statute or legislative history
suggests that Congress wanted the classification of gas to turn on
contractual terms. Moreover, the Court of Appeals' reading is
contrary to the whole thrust of the Act, for it has the effect of
turning a statutory scheme of price ceilings and deregulation into
a system of price supports for producers. It also creates a chaotic
scheme wherein the applicable provision for a particular type of
gas varies depending on the producer, the contract, and the current
market price. Pp.
486 U. S.
209-211.
2. The Court of Appeals also erred in overturning FERC's ruling
that certain gas qualified as "new tight formation gas" subject to
regulation under § 107(c)(5) of the Act is automatically qualified
as deregulated "new" gas under §§ 102(c) or 103. Section 107(c)(5)
gives FERC authority to make eligible, for special high-cost gas
pricing, natural gas "produced under such . . . conditions as
[FERC] determines to present extraordinary risks or costs." There
is nothing objectionable about FERC's ruling, which merely
recognizes that certain "new tight formation gas" -- which requires
the producer to file the same information (in addition to other
information) that would be filed to qualify under either § 102(c)
or § 103 -- is a subset of deregulated "new" gas under the latter
sections. The Court of Appeals' contrary conclusion was based on
its reading of § 101(b)(5), rejected above, and its erroneous
interpretation of certain portions of the legislative history. Nor
does FERC's rule intrude on the jurisdiction of other state and
federal agencies to make category determinations under § 503. FERC
has made no category determinations, but has merely promulgated,
pursuant to its ample authority, a definitional rule applicable in
determination proceedings. Pp.
486 U. S.
211-213.
813 F.2d 1059, reversed.
Page 486 U. S. 206
BRENNAN, J., delivered the opinion of the Court, in which all
other Members joined, except WHITE, J., who took no part in the
consideration or decision of the cases.
JUSTICE BRENNAN delivered the opinion of the Court.
These cases involve natural gas covered by overlapping
provisions of the Natural Gas Policy Act of 1978 -- one setting a
price ceiling, the other declaring prices deregulated. Petitioners
contend that, under
Page 486 U. S. 207
§ 101(b)(5) of the Act, such gas should be classified as
deregulated gas. The United States Court of Appeals for the Tenth
Circuit held that, under § 101(b)(5), such gas falls under
whichever classification affords producers the highest price under
their contracts and current market conditions. The Court of Appeals
also held invalid a Federal Energy Regulatory Commission (FERC)
ruling that certain "new tight formation gas" under § 107(c)(5) of
the Act is automatically "new" gas qualified for deregulated
treatment under § 102(c) or § 103 of the Act. We reverse on both
issues.
I
From 1938 to 1978, the Federal Government regulated only the
interstate natural gas market. By the 1970's, however, shortages in
the interstate market developed because gas producers could get
higher prices in unregulated intrastate markets. Two conflicting
legislative solutions were developed: the Senate passed a bill
deregulating interstate gas, S. 2104, 95th Cong., 1st Sess. (1977);
the House passed a bill extending federal regulation to intrastate
gas, H.R. 8444, 95th Cong., 1st Sess. (1977). The Conference
Committee struck a compromise. H.R.Conf.Rep. No. 95-1752 (1978).
The result was the Natural Gas Policy Act of 1978 (Act), Pub.L.
95-621, 92 Stat. 3351, 15 U.S.C. § 3301
et seq.
The Act defines various categories of gas, spanning both
interstate and intrastate gas, and creates a two-part system of
phased deregulation. First, the Act establishes price ceilings for
wellhead first sales of gas that vary with the applicable category
of gas and that gradually increase over time. §§ 101-110, 15 U.S.C.
§§ 3311-3320. Second, the Act establishes a three-stage elimination
of price ceilings for certain categories: the price ceilings for
certain "high-cost" gas were eliminated in 1979, for certain "old"
intrastate gas and "new" gas in 1985, and for certain other "new"
gas in 1987.
See § 121, 15 U.S.C. § 3331.
Many of these categories overlap. Recognizing the overlap,
Congress provided in § 101(b)(5) of the Act, 15 U.S.C. §
3311(b):
Page 486 U. S. 208
"If any natural gas qualifies under more than one provision of
this title providing for any maximum lawful price or for any
exemption from such a price with respect to any first sale of such
natural gas, the provision which could result in the highest price
shall be applicable."
In anticipation of the 1985 deregulation, FERC promulgated a
regulation interpreting §§ 121 and 101(b)(5) to mean that any gas
that was qualified for both deregulated and regulated treatment
would be treated as deregulated. 18 CFR § 270.208 (1987).
This preference for deregulatory treatment adversely affected
many gas producers who had entered into certain types of long-term
contracts. Typically, these contracts had one clause setting the
price if the gas were regulated and another clause setting the
price if it were deregulated. The contract price for regulated gas
was typically close to the price ceiling; the contract price for
deregulated gas was typically based on market prices or left open
to renegotiation. Because by 1984 the market price of natural gas
had plunged below the regulated price ceilings, these producers
stood to reap higher contractual prices if their gas was regulated
than if it were deregulated.
Dissatisfied with FERC's regulation, numerous producers
petitioned for review to the United States Court of Appeals for the
Tenth Circuit. The Court of Appeals rejected FERC's interpretation
of §§ 121 and 101(b)(5), adopting the producers' position that §
101(b)(5) unambiguously requires the applicable category to be that
which, at any particular moment, garners the producer the highest
contract price for its gas. 813 F.2d 1059 (1987). In explaining
this holding, the Court of Appeals also rejected FERC's ruling that
certain "new tight formation gas" subject to regulation under §
107(c)(5), 15 U.S.C. § 3317(c)(5), is automatically qualified for
deregulation as new gas under § 102(c) or § 103, 15 U.S.C. §§ 3312,
3313.
See 813 F.2d at 1069-1070. We granted certiorari.
484 U.S. 962 (1987).
Page 486 U. S. 209
II
"The plain meaning of the statute decides the issue presented."
Bethesda Hospital Assn. v. Bowen, 485 U.
S. 399,
485 U. S. 403
(1988). The Act states that "the provision which
could
result in the highest price shall be applicable." § 101(b)(5)
(emphasis added). It does not state that the applicable provision
is that which
will (depending on actual contracts and
daily market prices) result in the highest price for each producer.
We think these words call for a simple comparison between the
highest price permitted by one provision and the highest price
permitted by another: the higher the price ceiling, the higher the
price that "could result" under the provision. The provision with
the highest price ceiling thus applies uniformly to all producers
selling gas that falls within both provisions. When one of the
provisions sets no price ceiling at all --
i.e., it
deregulates -- that provision governs.
The Court of Appeals rejected this straightforward
interpretation on the ground that, although the price of
deregulated gas "could" in theory rise without limit, "the price of
regulated gas
could' be higher than the price of deregulated
gas." 813 F.2d at 1068. The court reasoned that "[s]uch an
understanding of `could' -- one that considers only the theoretical
possibilities -- renders § 101(b)(5) meaningless." Ibid.
Rather, the court concluded: "`Could' makes sense in § 101(b)(5)
only in the context of how gas sales actually occur."
Ibid. Under this reading of § 101(b)(5), the statute
requires a determination of which provision would actually result
in a higher price under current market prices for that gas and the
contractual arrangement each producer had for the sale of that gas.
Ibid. The provision that actually results in the highest
price at any particular moment establishes the applicable category
for that producer's gas.
We disagree with the Court of Appeals' conclusion that reading
the word "could" in § 101(b)(5) with its ordinary conditional
meaning makes so little sense that the word "could"
Page 486 U. S. 210
must be converted to the word "will." The conditional meaning of
"could" makes perfect sense if the statute does not mean to refer
to particular contracts, but rather to the generic situation of
parties in a precontract state: the provision that allows the
parties to contract to the highest conceivable price applies.
Congress must have had in mind the fact that, prior to entering
into a contract, the parties could always contract to a higher
price --
i.e., a higher price could result -- without a
price ceiling than with one. After all, no party has any reason to
contract to a higher price simply because a price ceiling has been
imposed; the price ceiling can only impose a direct legal restraint
if the market price would be above the price ceiling.
Cf.
§ 101(b)(9), 15 U.S.C. § 3311(b)(9) (declaring contract prices
enforceable if they do not exceed an applicable price ceiling, or
if a deregulatory provision applies). The Court of Appeals'
difficulty with the statutory language is caused by its focus on
the postcontract situation, where many of the contracts contain
clauses that have the perverse effect of increasing the price when
a price ceiling is imposed. We doubt seriously that Congress
enacted § 101(b)(5) with such contracts in mind, or that it would
have wished to make sure that the Act interacted with such
contracts to mandate the maximum price possible. Certainly nothing
in the legislative history suggests Congress had such a system in
mind.
Indeed, the Court of Appeals' reading is contrary to the whole
thrust of the Act, for it has the effect of turning a statutory
scheme of price ceilings and deregulation into a system of price
supports for producers. There is no evidence that Congress had any
intent to create such a producer-assistance program. The Act was a
compromise: those supporting deregulation were opposed only by
those who thought deregulation would allow producers to charge
excessive prices. Not one participant in the legislative process
suggested that producers should receive higher prices than
deregulation would afford them. The operating assumption of
Congress was
Page 486 U. S. 211
that deregulation was the most favorable regime for gas
producers under consideration.
See, e.g., 124 Cong.Rec.
28633 (1978) (statement of Sen. Jackson) (describing deregulation
as "the maximum economic incentive").
We are moreover reluctant to read § 101(b)(5) as making the
applicable provision for a particular type of gas vary not only
from producer to producer and from contract to contract, but from
day to day as the actual market price of that gas changes. The
statute is phrased in a general way that implies that all gas
fitting the same overlapping provisions will be treated the same,
and one would normally expect that a regulatory regime would apply
uniformly, rather than varying in such a chaotic fashion. The
statute calls for a comparison of statutory provisions, not
contractual ones, and nothing in the statute or legislative history
suggests that Congress wanted the classification of gas to turn on
contractual terms. Indeed, if the logic of the Court of Appeals'
position were pursued, then, even for gas that fell into two
regulated categories, § 101(b)(5) would require a comparison of
each producer's contract prices for each category, rather than a
comparison of the ceiling prices for each category. We see no
reason for inferring that Congress intended such a regulatory
regime or the disuniformity and administrative difficulties it
would entail.
III
We also disagree with the Court of Appeals' decision to overturn
FERC's ruling that certain gas qualified as "new tight formation"
gas under § 107(c)(5), 15 U.S.C. § 3317(c)(5), is automatically
also qualified as deregulated "new" gas under § 102(c) or § 103, 15
U.S.C. §§ 3312(c), 3313. Section 107(c)(5) gives FERC authority to
make eligible for special high-cost gas pricing natural gas
"produced under such . . . conditions as [FERC] determines to
present extraordinary risks or costs." Pursuant to § 107(c)(5),
FERC has defined "new tight formation gas" as gas
Page 486 U. S. 212
"(i) Which is new natural gas, (as defined in section 102(c)),
certain OCS gas qualifying for the new natural gas ceiling price
(as defined in section 102(d)), or gas produced through a new
onshore production well (as defined in section 103(c)); and"
"(ii) Which is produced from a designated tight formation
through a well the surface drilling of which began on or after July
16, 1979."
18 CFR § 271.703(b)(2) (1987). In the proceeding below, which
did not address certain Outer Continental Shelf gas under § 102(d),
15 U.S.C. § 3312(d), FERC has simply ruled that, because,
"[i]n order to qualify as new tight-formation gas under section
107(c)(5), a producer must file the same information, in addition
to other information, that would be filed to qualify as a section
102 or 103 determination . . . a determination that gas qualifies
as new tight-formation gas is implicitly a determination that the
gas meets the qualifications for either section 102(c) or 103 . . .
regardless of whether that was explicit at the time that the
determination was made."
49 Fed.Reg. 46874, 46880 (1984).
We see nothing objectionable about this ruling, which merely
recognizes that, as defined, the types of "new tight formation gas"
that were under consideration by FERC are a subset of deregulated
"new" gas under § 102(c) or § 103. The Court of Appeals' objections
to the ruling were based on its conclusion that allowing one
qualification to result automatically in a second qualification
would interfere with what it inferred was Congress' intent to give
producers the right to select the categories they desired. 813 F.2d
at 1069. The court had two bases for inferring this intent. One was
its reading of § 101(b)(5), which we reject above. The other was
its reading of certain portions of the legislative history, which
state that governmental agencies have no affirmative obligation to
identify the applicable classification, and that it is up to
producers to apply for the designations they want. 813 F.2d at 1070
(quoting 124 Cong.Rec. 29109, 38363-38364 (1978)). But the fact
that Congress declined to impose affirmative investigative duties
on agencies hardly means that it did not want FERC to adopt rules
for classifying gas based on the evidence presented by producers at
determination hearings.
The producer respondents also argue that FERC's rule intrudes on
the jurisdiction other state and federal agencies have to make
category determinations under § 503, 15 U.S.C. § 3413. FERC,
however, has made no category determinations. It has merely
promulgated a definitional rule applicable in determination
proceedings. This FERC has ample authority to do. Not only does §
107(c)(5) give FERC broad authority to define the gas eligible for
§ 107(c) (5) treatment, but § 503 gives FERC authority to review
the category determinations of other agencies and to prescribe the
manner and substantiation with which such category determinations
must be presented for its review. And under § 501, 15 U.S.C. §
3411, FERC has general authority to define terms under the Act and
to prescribe "such rules and orders as it may find necessary or
appropriate to carry out its functions. "
For the foregoing reasons, the judgment of the Court of Appeals
is
Reversed.
JUSTICE WHITE took no part in the consideration or decision of
these cases.
